Seeing the Light
In April 2002, Leiner emerged from bankruptcy. Many of the benefits from the new systems had taken hold and management was able to see the gains generated by the vastly improved access to essential data. Some of these gains are anecdotal: Chief Executive Officer Robert Kaminski now has a computer display on his desk that provides a minute-to-minute view of the company's financial performance measured by working capital, accounts receivable, accounts payable, cash flow and inventory. Kaminski, who calls his digital dashboard the Jumbotron, has said, "It tells you what you can't do without to run a company."
But there have also been vital statistical improvements at Leiner. Employee output is up more than 63 percent without additional investment in capital equipment; the company's key accounts are all still under contract and enjoy upwards of 95 percent accuracy in on-time deliveries and complete orders; total supply chain costs are down 15 percent; accounts receivable are being paid at a pace faster than industry averages; and inventory turns have improved 60 percent, to about 4 a year. All of this translates into impressive profits as well: After two years of negative numbers, Leiner recorded a positive EBIDTA of $40 million in fiscal 2002 and the company says EBIDTA will increase to $70 million in fiscal 2003, about 12 percent of sales. In addition, Leiner's bank debt-to-EBIDTA ratio, which was 9.5 in January 2002, fell to 2.4 in February 2003.
With the turnaround on course, Leiner is determined to learn from its near-death experience. For one thing, Leiner is continuing to improve its supply-chain and manufacturing systems as well as its forecasting capabilities, because "you have to keep ahead of the technology," says company president Bensussen. "Our retailers demand it, especially in difficult economic times." At the same time, Leiner is adding new products again, recently launching private-label versions of Advil Liqui-gels painkiller and the allergy pill Claritin. Over-the-counter drugs have typically represented about 25 percent of Leiner's sales in past years, but the company hopes to increase this to 30 percent or higher within the next five years or so. And even sooner, Leiner expects a bump in sales of multivitamins as aging Baby Boomers expand the market for daily pills. All of this, says Bensussen, is part of a diligently plotted business plan for short- and long-term growth: "It's very well programmed. Now that we've streamlined our supply chain and accounting systems, updated the data we have available for forecasting and analysis, and our service levels have reached historical highs, we're not going to let it slip."
Finding out how much it didn't know about itself was a tough lesson for Leiner. And after its dip into Chapter 11, it's not yet clear that the new growth strategy will succeed in a sluggish economy. But if Leiner struggles again, at least it will know where the bleeding is coming from.
Jeffrey Rothfeder writes frequently about business, security, environmental and technology issues. Please send comments and questions on this story to firstname.lastname@example.org.
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